Congress is continuing its 80 year tradition of spending to spur the economy through its passage on February 7 of the Economic Stimulus Act of 2008 ("ESA"), which President Bush is expected to sign. Here are some of the major highlights:
- A tax credit to taxpayers. High income taxpayers should not wait around the mailbox for their check - the credit starts to phase out for taxpayers with AGI over $75,000 ($150,000 on a joint return) and is completely phased out at levels not much higher than that. Nonresidents, tax dependents (e.g., students who are declared as a dependent on their parents' returns) and estates and trusts are also ineligible. The basic credit will range from $300 to $600 (double that for married couples), based on a formula that takes into account the amount of qualifying income of the taxpayer and his or her income tax liability. Taxpayers with dependent children under age 17 that otherwise qualify will receive an additional $300.
- The Code Section 179 deduction for new property is increased to $250,000 per year. This deduction applies to property acquired for use in an active trade or business that is tangible property or computer software which would generally be depreciated over multiple years instead of being expensed in one year. This is an increase from $128,000. The deduction starts phasing out as more than $800,000 of Section 179 property is put in service. Thus, by increasing deductions, businesses will pay less in tax.
- 30% bonus depreciation (that is, extra depreciation allowed in the first year of service) is replaced with 50% bonus depreciation.
- The maximum depreciation deduction for qualified passenger automobiles is increased by $8,000.